RBA expected to drop rates

MOST Australians are expecting the Reserve Bank of Australia to reduce official interest rates again when its board meets next week for the first time this year, a national survey by leading mortgage broker Loan Market has found.

The Loan Market poll which asked "What will the RBA do with interest rates at its February 7 meeting?' found 66 per cent of respondents believed the RBA would cut rates.

Thirty nine per cent of the 572 online poll respondents thought the central bank would lower the cash rate from the current 4.25% to 4% - the lowest level since March, 2010.

Twenty seven per cent of those surveyed thought the RBA might slash rates by as much as half a percentage point.

Twenty eight per cent tipped rates to stay on hold while only 6% are expecting a rate rise.

Loan Market chief operating officer Dean Rushton said consumers were clearly counting on more rate cuts in the first half of 2012.

"The RBA lowering rates in November and December last year was an appropriate course of action which was a welcome relief for borrowers and struggling sectors such as retail," he said.

"But there are no signs of an improvement in the current global economic environment, particularly the volatile situation in Europe.

"While the fundamentals of the Australian economy remain quite strong and consumer sentiment has improved, sections of the economy can benefit from the stimulus provided by more interest rate cuts."